Microchip Technology Updates Guidance in Business Update for Fourth Quarter Fiscal 2003
3/21/2003 - Microchip Technology Incorporated, a leading provider of microcontroller and analog semiconductors, updated its guidance for its fourth quarter of fiscal 2003 ending March 31, 2003. Net sales for the fourth quarter are expected to be down between 3 and 4% sequentially from our third fiscal quarter of 2003, and up between 10 and 12% from the fourth quarter of fiscal 2002. Earnings per share for the fourth quarter are expected to be approximately 17 cents, down 1 cent sequentially and up approximately 4 cents, or 34% from the fourth quarter of fiscal 2002. Microchip expects to release its March quarter and audited fiscal year 2003 results after the close of market on Wednesday, April 23, 2003.
“The March quarter is seasonally our weakest quarter of the year. This quarter is unusually back-end loaded because of the New Year holidays in early January, and the Chinese New Year starting in early February. The current quarter was made substantially more difficult with the threat of imminent war in Iraq, as well as the escalating tensions on the Korean peninsula,” said Steve Sanghi, Microchip’s President and CEO. “This has impacted our Asia sales performance, particularly in Korea, which we anticipate will be down in excess of 20%, leading to a sequential decline in overall Asian sales of approximately 8%. Europe sales are currently exceeding expectations, and are anticipated to be up approximately 11% sequentially. Overall sales performance in the Americas is weak, and is expected to be down by 8% sequentially. While Americas sales are strong in the distribution channel, and are expected to be up about 6% sequentially, sales in the Americas OEM channel are unexpectedly very weak, and are anticipated to be down approximately 17% sequentially. We attribute the Americas OEM sales shortfall to the threat of imminent war, which has led to deteriorating consumer and business confidence.”
“It seems as if OEM customers in North America are frozen in their tracks, and are deferring purchasing decisions pending a clearer picture on the geo-political front. With low consumer confidence affecting our consumer, automotive and communications business, and low business confidence affecting our office automation and industrial business, we do not believe that we will achieve the required level of turns orders by the end of March. Therefore, we are lowering our revenue and earnings per share guidance for the fourth quarter,” added Mr. Sanghi.
Microchip also announced plans to change its revenue recognition policy relating to sales to regional Asian distributors. Microchip will change from recognizing revenue when product is shipped to these distributors (Point of Purchase “POP”) to recognizing revenue when these distributors sell the product to their customers (Point of Sale “POS”). Historically, Microchip has recognized revenue from its Americas, European and multinational Asian distributors at POS, but has recognized revenue from regional Asian distributors at POP. This change will make revenue recognition consistent for all of Microchip’s distribution channels around the world.
“We believe that a focus on demand creation and sell-through to end customers is in the long-term best interest of Microchip. Revenue recognition at POS as Microchip’s sole revenue recognition policy is a more reflective measure of end customer demand. Instituting this change at this point will result in a revenue recognition policy that is uniform throughout the Company,” said Gordon Parnell, Microchip’s Chief Financial Officer.
To implement the change in revenue recognition, Microchip is required to record a cumulative change in accounting adjustment as of April 1, 2002, which was the start of fiscal year 2003. Quarterly operating results for the first three quarters of fiscal 2003 will be adjusted to conform to this change in accounting policy. These changes will be reflected in the Company’s March quarter and audited fiscal year 2003 results and in the Company’s Annual Report on Form 10-K for fiscal 2003.
“The change in revenue recognition is not expected to have any material impact on the March 2003 quarter results, as our Asian inventory ending March 31, 2003 is expected to be essentially flat with December levels,” added Mr. Parnell.
The Company also announced plans to delay its ramp-up schedule for Fab 4 in Gresham, Oregon, to October 2003, rather than the previously announced July 2003 schedule, in response to current business conditions. “While we will delay production startup to October, we will continue product and customer qualifications,” said Mr. Sanghi. “This will actually benefit the Fab 4 ramp-up because multiple products will be qualified and receive shipment approval from customers, allowing us to commence volume production at Fab 4 on the most cost-effective basis.”
Outlook for Fourth Quarter of Fiscal 2003, as of March 18, 2003
The following statements are based on current expectations. These statements are forward looking, and actual results may differ materially.
- Revenue for the fourth fiscal quarter ending March 31, 2003 is currently expected to be between $164 million and $166 million, down 3% to 4% from the third fiscal quarter ended December 31, 2002.
- Gross margins for the fourth fiscal quarter ending March 31, 2003 are currently projected to be between 54.5% and 54.75%. Generally, gross margins will fluctuate over time, driven primarily by the product mix of microcontrollers, analog products and memory products, manufacturing yields, fixed cost absorption, factory utilization levels, pricing pressures in our non-proprietary product lines and competitive and economic conditions.
- Operating expenses for the fourth fiscal quarter ending March 31, 2003 are expected to be between $44 and $44.5 million. Operating expenses fluctuate over time, primarily due to revenue and profit levels.
- Included in operating expenses, research and development (R&D) expense for the fourth fiscal quarter ending March 31, 2003 is expected to be approximately $23 million. We continue to invest in R&D in order to provide Microchip with new manufacturing technologies and increased product offerings.
- Earnings per diluted share for the fourth fiscal quarter ending March 31, 2003 are expected to be approximately 17 cents.
- The tax rate for the fourth fiscal quarter ending March 31, 2003 is anticipated to be 25.5%.
- We expect to add approximately $15 million to our existing cash balances during the fourth fiscal quarter ending March 31, 2003, net of approximately $16 million quarter to date utilized to repurchase shares as part of our stock buy-back program. Cash generation in the March quarter has been adversely impacted by the back-end loaded nature of revenue in the quarter.
- Capital expenditures for fiscal 2003 are expected to be approximately $265 million, with approximately $15 million incurred in the fourth fiscal quarter ending March 31, 2003. The level of capital expenditures varies from time to time as a result of actual and anticipated business conditions.
- Depreciation expense for the fourth fiscal quarter ending March 31, 2003 is expected to be approximately $28 million.
- Microchip announced on August 7, 2002 that its Board of Directors had authorized a stock buy-back of up to 2.5 million shares. Microchip has been buying stock in the open market since that date, and to date, 1,089,700 shares have been repurchased at a cost of approximately $23.2 million. Following this press release, Microchip intends to continue repurchasing its common stock in accordance with its buy-back program and all applicable laws and regulations.
About Microchip
Microchip Technology Inc. manufactures the popular PICmicro® field-programmable RISC microcontrollers, which serve 8- and 16-bit embedded control applications, and a broad spectrum of high-performance linear and mixed-signal, power management and thermal management devices. The Company also offers complementary microperipheral products including interface devices; microID® RFID devices; serial EEPROMs; and the patented KEELOQ® security devices. This synergistic product portfolio targets thousands of applications and a growing demand for high-performance designs in the automotive, communications, computing, consumer and industrial control markets.
The Company's quality systems are ISO 9001 (1994 version) and QS9000 (1998 version) certified. Microchip is headquartered in Chandler, Arizona with design facilities in Mountain View, California, Plano, Texas, Bangalore, India, and Lausanne, Switzerland; semiconductor fabrication facilities in Tempe and Chandler, Arizona, Puyallup, Washington; and Gresham, Oregon, and assembly and test operations near Bangkok, Thailand. Microchip employs approximately 3,350 people worldwide and has sales offices throughout Asia, Europe, Japan and the Americas. More information on the Company can be found at www.microchip.com.
The Microchip logo and name, PICmicro®, KEELOQ® , microID® and PowerSmart® are registered trademarks of Microchip Technology Incorporated. dsPICTM and rfPICTM are trademarks of Microchip Technology Incorporated.
Previous Page | News by Category | News Search
If you found this page useful, bookmark and share it on:
If you are familiar with RSS feeds, you can also sign up for our free blog feed. Our RSS feed is updated in real-time while our newsletter is updated daily.
